A PROFILE OF THE SOUTH AFRICAN WINE MARKET VALUE CHAIN

A PROFILE OF THE SOUTH AFRICAN WINE MARKET VALUE CHAIN 2013 Directorate Marketing Private Bag X 15 Arcadia 0007 Tel: 012 319 8455 Fax: 012 319 8131 E-mail: MogalaM@daff.gov.za www.daff.gov.za

Table of Contents 1. DESCRIPTION OF THE INDUSTRY 4 1.1 Production Areas 5 1.2 Production 12 1.3 Deregulation of markets and re-regulation of labor 14 1.4 Consumption 15 2. MARKET STRUCTURE 16 2.1 Domestic markets and prices 17 3. EXPORTS OF WINE OF FRESH GRAPES 19 3.1 Provincial and district export values of South African wines 29 3.2 Share analysis 43 4. IMPORTS OF WINES OF FRESH GRAPES 47 4. MARKET INTELIGENCE 51 4.1 Competitiveness of South African wine exports 51 5. MARKET ACCESS 63 5.1 Tariff, quotas and the price entry system 63 5.2 The EU-South Africa wine agreement and its implications 75 5.2.1 Rules on additives, processes and what is natural wine 76 5.2.2 Voluntary standards 78 5.2.3 British Retailer Consortium (BRC) Global Standard Food 78 5.2.4 The Integrated Production of Wine (IPW) Scheme 79 5.3 Entry barriers and rules of participation in the UK retail market 80 5.3.1 Elements of an industrial convention: Delivering basic quality 80 5.3.2 Elements of a market convention: Delivering price and promotions 81 5.4 Entry barriers and rules of participation in other end-markets 81 5.4.1 Netherlands 81 5.4.2 Sweden 81 5.4.3 Germany 82 5.4.4 USA 82 6. REGULATORY FRAMEWORKS 83 6.1 The wine of Origin Scheme 83 2

6.1.1 Origin 83 6.1.2 Cultivar 86 6.1.3 Certification system 86 7. THE VALUE CHAIN FOR WINE IN SOUTH AFRICA 87 8. ORGANIZATIONAL ANALYSES 92 8.1 FORMAL INSTITUTIONS AND ORGANIZATIONS 92 8.2 The official SAWIS picture 97 8.3 Strengths, Weaknesses Opportunities and Threats (SWOT) analysis 98 8.4 Business opportunities and challenges 99 9. EMPOWERMENT ISSUES AND TRANSFORMATION IN THE SECTOR 100 9.1 Transformation of the industry 100 9.2 BEE in the wine industry 102 10. ACKNOWLEDGEMENTS 104 3

1. DESCRIPTION OF THE INDUSTRY The wine industry in South African context is much wider than signified by the ordinary meaning of the word wine. Brandy and its building blocks (wine for brandy and distilling wine) have always formed a significant part of South African wine industry. In recent years, grape juice concentrate for use in non-alcoholic beverages, and not just for sweetening of wine, have come to the fore. The South African wine industry thus encompasses wine (natural, fortified and sparkling), wine for brandy, distilling wine, brandy and other spirits distilled from distilling wine, and grape juice and grape juice concentrate for use in non-alcoholic products. Wine products includes the following: Natural wine is a non fortified and non sparkling wine, including perle wine which is wine carbonated to the extend that the pressure in the container in which it is sold is between 75 and 300 kpa. It includes any grape juice or must and grape juice or must concentrate used in the sweetening of such natural wine. Fortified wine is a non-sparkling wine which has been fortified with wine spirit. It includes the volume of wine spirit used in the fortification process. Sparkling wine is carbonated (either by fermentation or by impregnation with carbon dioxide) to the extent that the pressure in the container in which it is sold is more than 300 kpa. It includes any grape juice or must and grape juice or must concentrate used in the sweetening of such sparkling wine. Wine for brandy is wine specially prepared for double distillation in a pot still and then, as distillate, matured for a period of at least three years in oak casks with capacity of more than 340 litres. Distilling wine is wine specially prepared for distillation of spirits intended for use in brandy or other spirits, for fortification of wine for industrial purposes. Grape juice concentrate and grape juice refers to unfermented, undiluted or concentrated juice from grapes destined for use in non-alcoholic products such as fruit juices. The wine industry in the Western Cape (excluding tourism) supported almost 256 908 jobs in 2012. The wine industry contributed R14, 214 billion to the Western Cape economy between 2008 and 2012. This amounted to approximately 7.3% of the total provincial Gross Domestic Product of the Western Cape. When assessing the contribution that was made to the national economy s GDP, an amount of R26, 223 billion or 1,95% was added to the South African economy. The wine industry is an important contributor to the economy of the Western Cape region of South Africa. Perhaps, even more important than the direct economic impact of employment and foreign exchange generation is the unique position of wine (and to some extend wine tourism) in generating images of South Africa abroad.

Gross Value ('000 rands) Figure 1 below indicates wine gross value of production (GVP) between 2003 and 2012 period. 4500000 Figure 1: Wine gross value of production 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Period (Years) Source: South African Wine Industry Information and Systems (SAWIS): As indicated in Figure 1 above, wine gross value of production started to increase in 2003 to 2004, and then a slight decline between 2005 and 2006 occurred to lower levels of about R2.6 million. Between 2007 and 2008, wine gross value of production experienced a consistent increase to levels of approximately R3.3 million and a peak was attained in 2009 at approximately R3,6 million. The increase was primarily influenced by increases in wine exports and the strengthening of the exchange rate of the rand against the currencies of major trading partners. In 2010 and 2011, wine gross value of production experienced a slight decline until a peak in 2012 was attained at approximately R3.8 million. The figure further indicates that wine gross value of production was from a low base in the first half of the ten year period as compared to the high base in the second half of the period under scrutiny. The increase in 2012 represents 6% of wine gross value of production as compared to 2011. 1.1 Production Areas In South Africa, viticulture takes place mainly at a latitude of 34 south in an area with mild Mediterranean climate. The wine industry is overwhelmingly based in the province of Western Cape; with some production taking place in the Northern Cape and (very little) in Kwa-Zulu Natal. The Western Cape enjoys a cooler climate than its latitude might suggest, with good conditions for growing a wide range of grape varieties for winemaking. The traditional winegrowing areas along the coastal zone benefit from its cooling breezes that moderate the summer temperatures, especially the cold Benguela current that flows northwards in the Atlantic from Antarctica. 5

The Cape mountain ranges form a backdrop to what is internationally recognized as one of the most beautiful wine producing areas of the world. The vineyards lie on a valley sides of the mountain foothills some areas, and in flatter plains in others. The diversity of topography and mesoclimatic conditions results in a wide range of wine characters (see Maps 1 to 5). One of the potential competitive advantages of the Cape wine lands is great variety of soils, something that should be exploited. Table 1: Regional distribution of grape vines and of wine output in 2012 (excluding sultana) Region Number of vines % of total Area in hectares % of total vines hectares Worcester 27 916 830 9.36 8 737 8.73 Paarl 48 919 107 16.41 16 202 16.19 Stellenbosch 50 299 742 16.87 16 526 16.51 Malmesbury 34 609 493 11.61 13 730 13.72 Robertson 49 304 680 16.54 14 550 14.54 Olifants River 27 579 292 9.25 10 110 10.10 Orange River 10 244 468 3.44 4 829 4.82 Little Karoo 8 119 785 2.72 2 643 2.64 Breedekloof 41 173 992 13.81 12 766 12.75 Total 298 167 389 100.00 100 093 100.00 Source: South African Wine Industry Information and Systems (SAWIS): 2012 Table 1 shows that geographically, the area of wine grape vineyards is fairly evenly distributed in four wine regions (Paarl 16,19%, Stellenbosch 16,51%, Malmesbury 13,72% and Robertson 14.54%). These areas cover more than 60% of total area planted during 2012. Of these, Paarl, Stellenbosch and Robertson are dominated by vineyards owned by farmers that are members of the cooperatives (or shareholders of companies that are ex cooperatives). Paarl and Malmesbury have both independent and cooperative grape growers and cellars. The wine industry in Stellenbosch is overwhelmingly operated by independent growers and cellars. 6

Map 1: Production areas of South Africa Geographical Units Source: SAWIS 7

Map 2: Production areas of South Africa Regions Source: SAWIS 8

Map 3: Production areas of South Africa DistrictsSource: SAWIS Source: SAWIS 9

Map 4: Production areas of South Africa Wards (Western Cape Source: SAWIS 10

Map 5: Production areas of South Africa Wards (Northern Cape) Source: SAWIS 11

Area planted (ha) 1.2 Production Figure 2 illustrates total area under wine grape vineyards (excluding sultana) between 2003 and 2012 period. Figure 2: Total area under wine grape vineyards (Excluding Sultana) 103000 102000 101000 100000 99000 98000 97000 96000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Period (Years) Source: South African Wine Industry Information and Systems (SAWIS): 2012 The graph further illustrates that the total area planted under wine grape vineyards (excluding sultana) has increased dramatically in the last decade, from 98 000 ha in 2003 to 100 000 ha in 2012. The figure also illustrates that between 2008 and 2012, there was a decline in the total area under wine grape vineyards, as compared with the first half of the period under review. The figure further illustrates that in 2006 a peak was attained in total area under wine grape vineyards at approximately 102 000 ha. The figure also illustrates that the total area planted under wine grape vineyards (excluding sultana) declined consistently from 2008 to 2012. The decline in total area under wine grape vineyards during the 2012 represents 0.47% as compared to 2011. Figure 3 below indicates total production of different wine products in South Africa between 2003 and 2012. 12

Wine products (Gross litres) Figure 3: Total production of wine products 1E+09 900000000 800000000 700000000 600000000 500000000 400000000 300000000 200000000 100000000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Period (Years) Natural wine Wine for brandy Distilling wine Grape juice concentrate Source: South African Wine Industry Information and Systems (SAWIS): 2012 The figure further indicates that during the past decade, majority of wine producers in South Africa have been concentrating mainly on the production of natural wine. That has been mainly due to the volatility of prices, reflecting changes in domestic and export demand and previous planting decisions from 2003 to 2012 period. According to the graph, it clearly indicates that natural wine was in demand throughout the whole period from 2003 to 2012 period, followed by distilling wine then both grape juice and wine for brandy. The figure further indicates that in 2011 and 2012, natural wine production in South Africa attained a peak at approximately 831 and 870 million gross litres respectively, while the lowest production of wine for brandy was in 2011 at approximately 34.2 million gross litres. Figure 4 below indicates good wine production as against average wine producer prices between 2003 and 2012. 13

Production (gross litres) Average producer prices (cents/litre) 500 450 400 350 300 250 200 150 100 50 0 Figure 4: Good wine production vs Average wine producer prices 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1E+09 900000000 800000000 700000000 600000000 500000000 400000000 300000000 200000000 100000000 0 Good wine production (Gross litres) Period (Years) Average producer prices (Cents/litre) Source: South African Wine Industry Information and Systems (SAWIS): 2012 Figure 4 further indicates that over the past decade, domestic production of good wine started to increase in 2003 and at the sametime the average wine producer prices followed the same trend, until a decline was experienced between 2005 at approximately 628 million gross litres at an average of R338.35 cents per litre. The figure also indicates that good wine production in South Africa attained a peak in 2012 at approximately R870 million gross litres and at average wine producer prices of about 437.75 cents per litre. Between 2003 and 2005, the figure indicates that it was profitable to produce wine as traders received more money for producing less quantities of wine. Between 2006 and 2009, it was expensive to produce and sell wine as traders received less money for producing high quantities of wine. The average producer price of wine started to increase in 2003 and experienced a decline between 2004 and 2007 at approximately between 334.87 and 338.35 cents /litre. The figure further indicates that between 2003 and 2011, there was a constant decrease in the average producer prices of good wine during the period under review. The lowest average producer prices that were attained in terms of cents per litre were in 2007 at approximately 334.87 cents per litre. 1.3 Deregulation of markets and re-regulation of labor The political transition of the 1990s brought about a wave of change in the political and economic position of the country. With the new government in power, labor and employment legislation was brought to a minimum International Labor Organization (ILO) level and beyond to ensure that basic human and social rights were afforded to all the workers under the law. The extension of Labor Relations Act of 1995 and the free movement of unions in the sector led to bursts of union activity in agriculture. The extension of basic human, social and economic rights to farm workers resulted, inter alia, in increased levels of casualization and externalization which were carried out to mitigate the consequences of increased labour costs and the costs of complying with labour legislation. 14

This did not take place overnight, by the mid-1990s, farmers had developed new technologies as a result of industry restructuring (deregulation, opening of the export market), but that labour practices had remained unchanged. It was also found out that employment had grown in wine farms (due to the major new plantings that took place in the 1990s) and that there was no apparent decrease in the size of permanent labour force, despite the passing of new labour legislation. At that time, wine farms were said to be still stuck in a low productivity and low wage model, with no formal contracts between farm workers and owners, no middle management (except in larger farms), and very low levels of unionization. The first signs of labour restructuring had emerged in some farms, where owners had cut their permanent work force, adopted technologies that minimized the need for such workforce, and were restricting the security of occupation on farms by hiring younger workers. These practices were to become the norm of labour management in wine farms in the following decade. In the mid-2000s, they characterized the changes in the wine industry resulting from deregulation, opening of export markets and regulation of labour a double divide. The first divide entails the winners and losers among cellars and farmers, depending on how positioned they are to make use of global export opportunities. The second divide is among the workers that remain in the permanent workforce (usually skilled ones) and those who have been casualized and externalized, and are now hired through labour contractors. This movement towards the minimization of a permanent labour force and the casualization of unskilled and low-skilled labour is not confined to the wine industry, but it is part of a wider process taking place in the Western Cape and elsewhere in South Africa, especially in labour-intensive farms. These casual workers are excluded from the basic entitlements that permanent workers have now gained. Despite reporting wages that may not be lower than permanent workers, casual workers face higher livelihood vulnerability and insecurity. 1.4 Consumption Table 2 below depicts per capita consumption of wine products in the domestic markets between 2003 and 2012. Table 2: Per capita consumption of wine products in the domestic markets between 2003 and 2012 Wine consumption litres per capita Year Natural wine Sparkling wine Fortified wine Total 2003 6.39 0.16 0.65 7.19 2004 6.43 0.17 0.67 7.26 2005 6.27 0.18 0.68 7.13 2006 6.24 0.17 0.71 7.12 2007 6.52 0.19 0.71 7.43 2008 6.42 0.20 0.69 7.43 2009 6.01 0.17 0.68 6.86 2010 6.09 0.18 0.66 6.93 2011 6.14 0.17 0.65 6.97 2012 6.18 0.16 0.64 6.98 Source: South African Wine Industry Information and Systems (SAWIS): 2012 15

The table further depicts that the local consumption of wine has slightly increased in 2012 and a rapid growth in the volume of exports in the last couple of years is evident. South Africans have continued to consume all types of alcohol and have consumed increasing amounts of beer and spirits. At the same time the consumption of wine is hardly growing. The wine industry will therefore struggle to maintain a share in the market for alcoholic beverages in both the global and local markets. The table also depicts that consumption of natural wine has increased in 2012, while consumption of sparklin and fortified wines slightly declined over the same period 2. MARKET STRUCTURE The South African wine industry has gone through a tough period of major changes over the past decade, as largely reflected by the changes in its economic structure and institutional framework. Its re-introduction into the world trade setup has brought huge opportunities, as reflected by the increase in exports but on the other hand has brought pressure on its competitiveness, both locally and abroad. Table 3: Extent of the total South African wine industry Table 3 below shows the extent of the total South African wine industry between 2010 and 2012 marketing season. Grapes crushed in tons 2010 2011 2012 2012/2011 TREND White varieties 812 894 802 937 915 711 114.0 Red varieties 375 236 415 062 428 188 103.2 Table grapes 73 179 84 531 70 575 83.5 Total 1 261 309 1 302 530 1 414 474 108.6 Production in million litres Natural wine 799.8 831.2 870.9 104.8 Wine for brandy 39.6 34.2 62.3 182.2 Distilling wine 113.3 107.2 121.8 113.6 Grape juice 52.1 40.2 40.1 99.8 concentrate and grape juice Total 984.8 1012.8 1095.1 108.1 Domestic sales (wine) in million litres Natural wine 304.4 310.8 319.8 102.9 Fortified wine 33.1 33.1 32.9 99.4 Sparkling wine 8.9 8.8 8.5 96.6 Spirits 112.2 115.5 117.9 102.1 RTD s 375.8 390.5 431.9 110.6 Beer 2902.0 2968.5 3016.0 101.6 Total 3736.4 3827.2 3927.0 102.6 16

Grapes crushed in tons 2010 2011 2012 2012/2011 TREND Exports (wine) in million litres Natural wine 370.9 350.4 408.9 116.7 Fortified wine 0.4 0.4 0.3 75.0 Sparkling wine 7.2 6.6 8.0 121.2 Total 378.5 357.4 417.2 116.7 Source: South African Wine Industry Information and Systems (SAWIS): 2012 Out of a total of 1.4 million tons of grapes crushed in 2012, the trend in terms of percentages was 114% of white varieties, 103% were red varieties and 84% were table grapes. Total production was slightly over 1 million litres, of which (104.8%) was natural wine and the brandy was (182.2%), distilling wine (113.6%) and Grape juice concentrate and grape juice (99.8%). In percentage terms, Natural wine and RTD s sales constitute the vast majority of sales in both the domestic market (102.9%) and 110.6% respectively. In the export market, sparkling wine dominated at about (121.2%). Reds make up 110.6% of domestic sales, even though they account for 103.2% of production. Fortified wines and sparkling wines are relatively small niches and sell almost exclusively on the domestic market. By comparison, the industry in 2012 exhibited similar levels of grape production and similar make up in terms of production wine; rebate/distilling wine and non-alcoholic. However, natural wine exports represented approximately 116.7% of total sales (by volume) as the industry had just started to gear up for the international wine markets following the end of sanctions. 2.1 Domestic markets and prices There is an extensive distribution of wholesalers and retailers, as well as producer cellars, estates and other organizations which market wine directly. They ensure that the product reach consumers around the country. The opposite picture applies to private cellars and producing wholesalers. Table 4: Varieties utilized for total wine making purposes during 2012 Variety Total Tons % of variety crushed by Private Wine Producer Producing Wholesalers Cellars Cellars Chenin Blanc 300 031 10.3 87.0 2.7 Colombar(d) 298 775 4.7 94.8 0.5 Muscat 37 731 10.7 89.3 0.5 dálexandrie Sauvignon Blanc 100 625 31.4 53.9 14.7 Muscadel 11 402 32.2 67.3 0.5 Chardonnay 82 232 23.4 67.2 9.4 Viognier 8 390 27.0 56.6 16.4 Semillon 15 646 23.5 68.9 7.6 Other white varieties 60 881 13.4 76.1 10.5 17

Table grapes 43 279 24.2 75.8 0.0 Total white 958 990 13.4 82.3 4.3 varieties Cabernet 91 140 27.9 54.3 17.9 Sauvignon Cinsaut 28 868 10.2 83.7 6.0 Pinotage 64 603 23.8 65.7 10.5 Merlot 65 953 30.3 52.8 16.3 Shiraz 98 955 29.5 55.2 15.4 Ruby Cabernet 36 243 9.8 88.9 1.3 Cabernet Franc 6 514 44.6 36.0 19.4 Petit Verdot 7 694 30.2 46.6 23.2 Other red 28 219 51.6 33.6 14.8 varieties Table grapes 27 296 0.1 99.9 - Total red varieties 455 484 26.0 61.4 12.6 Total white and red 1 414 474 17.4 75.6 7.0 Source: South African Wine Industry Information and Systems (SAWIS): 2012 Table 4 above shows that cooperatives and ex-cooperatives (producer cellars) still crush approximately 82.3% of all grapes used for wine making locally during 2012 marketing season. Along with a few producing wholesalers, they are the ones that can provide economies of scale, competitive pricing and large volumes. These are essential requirements for supermarket chains to place wines on the shelf. The fact that cooperatives focus on run of the mill wines is an open secret, although it is perhaps insufficiently remarked in industry publications how much they have improved in the last decade in terms of quality the result of technical improvements in both wine making and viticulture. Cooperatives crush a much higher proportion of white varieties than red, and a much lower proportion of their average share of highly sought varieties such as Sauvignon Blanc, Cabernet Sauvignon and Shiraz. Yet, they are still responsible for crushing over half of the production of these varieties, with the exception of Sauvignon Blanc. This is mainly due to climatic reasons as well as many cooperative farmers are located in warmer areas that are not friendly to this grape variety Table 5: Average prices of wine sold in bulk in South Africa (2012) Varieties Cent per litre 2007 2008 2009 2010 2011 2012 All varieties 334.87 340.67 384.21 413.48 424.90 437.75 Cabernet Sauvignon 430.49 451.74 539.66 583.72 618.50 636.47 Merlot 396.68 417.67 495.26 556.81 584.34 617.37 Pinotage 396.68 410.15 472.69 535.38 584.01 607.15 Shiraz 458.12 471.89 560.82 601.86 621.41 647.82 All red varieties 374.41 386.75 459.08 502.97 533.59 558.48 Chardonnay 474.14 481.54 523.90 530.75 532.66 511.98 Sauvignon Blanc 517.21 519.00 546.06 538.00 540.69 532.08 18

Colombar 297.46 297.23 314.72 328.17 346.81 350.15 Chenin Blanc 323.17 321.45 350.23 367.89 380.72 379.28 All white varieties 314.46 314.71 345.44 364.98 372.41 382.80 NB. Price excludes added wine spirit Concentrate/Sweet must for sweetening Cent per litre 2007 2008 2009 2010 2011 2012 262.13 293.28 362.17 365.57 366.56 424.27 Cent per litre @ 10% ALC/VOL Wine for brandy 2007 2008 2009 2010 2011 2012 222.43 225.45 236.33 261.14 249.71 289.58 Cent per litre @ 10% ALC/VOL Distilling wine 2007 2008 2009 2010 2011 2012 93.36 95.50 97.83 109.66 111.42 124.01 Source: South African Wine Industry Information and Systems (SAWIS): 2012 Table 5 shows average prices of wine sold in bulk in South Africa between 2007 and 2012 period. Table 5 further shows the global red wine (Shiraz) that started in 2007 and has continued in the following 5 years. In all white varieties, Sauvignon Blanc in 2012 was trading at 532.08 cents per litre as compared to 540.69 cents per litre in 2011. The average producer price of wine for brandy has increased at an increasing rate from 2008 to 2010 and 2012 but decreased in 2011 to 249.71 cents per litre. The average producer price of distilling wine has increased in 2008 compared to 2007 but from 2008 to 2012, there was a consistent increase in terms of its price. Some cooperatives indicated that in 2010, they were profiting more from a hectare of vineyard that was being managed to produce distilling wine than from a hectare managed for table wine production. Globally, the wine industry is generally highly price responsive. Price movements, especially in global context, characterized by over production, high subsidized regimes, surplus removal schemes and export promotion support, fluctuate considerably, causing uncertainty and instability. 3. EXPORTS OF WINE OF FRESH GRAPES This is a review of world level trade data for wines of fresh grapes, including fortified wines by South Africa between 2003 and 2012. Figure 5 below depicts export volumes of wines of fresh grapes (including fortified wines) from South Africa to various regions of the world between 2003 and 2012. 19

Export Volumes (''000 litres) Figure 5: Export volumes of wines of fresh grapes (including fortified wines) to various regions 6000000 5000000 4000000 3000000 2000000 1000000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Africa 751594 944000 961411 886602 1689415 2878630 3901246 3989565 5411697 5641103 Americas 99752 144357 203269 174805 175863 194361 359172 333890 361495 379295 Asia 92295 96295 98875 130751 1176662 270321 2317799 514215 430645 508428 Europe 1643881 863465 941060 851457 1476093 962457 2798610 2826065 1371870 1471551 Oceania 59410 25529 22356 12350 67639 103718 333004 294430 304293 188983 Source: Quantec EasyData Period (Years) The figure further depicts that the major export market for wines of fresh grapes from South Africa to the world was Africa, followed by Europe and Asia. Exports of wine of fresh grapes from South Africa to Africa started to increase in 2004, with a slight increase in 2005 and a decline in 2006 to lower levels of approximately 886 000 litres. In 2007 to 2009, exports of wine of fresh grapes from South Africa to Africa experienced an increase until a peak was attained in 2012 at approximately 5.6 million litres. The figure also depicts that exports of wine of fresh grapes from South Africa to Europe attained a peak in 2010 at approximately 2.8 million litres. The figure further depicts that exports of wine of fresh grapes from South Africa to Asia attained a peak in 2009 at approximately 2.3 million litres. The increase in exports of wines of fresh grapes from South Africa to Africa in 2012 represents 4.24% as compared to 2011. Natural wine as a category makes up almost 99% of exports with the rest accounted by sparkling wine and fortified wines. Given the small size of exports of fortified wine, it is curious that the European Union (EU) forcefully insisted that South Africa drop the use of names port and sherry from exported products and that almost brought down the negotiations with South Africa on a bilateral trade agreement. Table 6: Types of exported wine and other liquor products (2012) in litres Types of wines and Packaged Bulk Total litres spirits Litres AS % of Litres AS % of total per variety total per variety 2012 20

Types of wines and spirits Packaged Bulk Total litres Litres AS % of Litres AS % of total per variety total per variety 2012 Chardonnay 10 911 129 34.12 21 063 147 43.59 31 974 276 Sauvignon Blanc 15 938 804 53.98 13 585 929 35.50 29 524 733 Chenin Blanc 15 421 966 25.71 44 565 684 65.88 59 987 650 Other white wine 28 448 139 30.09 66 090 977 46.02 94 539 116 Blanc de Noir and 6 371 430 21.21 23 662 962 78.79 30 034 392 Rose Cabernet Sauvignon 10 972 836 67.85 5 200 032 32.15 16 172 868 Shiraz 12 133 572 62.34 7 330 178 37.66 19 463 750 Pinotage 7 723 513 52.15 7 087 766 47.85 14 811 279 Merlot 4 772 698 52.07 4 393 460 47.93 9 166 158 Other red wine 47 771 043 46.27 55 476 687 53.73 103 247 730 Subtotal natural 160 465 130 39.24 248 456 822 60.76 408 921 952 wine Fortified wine 274 425 100.00 - - 274 425 Sparkling wine 8 032 172 100.00 - - 8 032 172 Total wine 168 771 727 40.45 248 456 822 59.55 417 228 549 Source: South African Wine Industry Information and Systems (SAWIS): 2012 According to table 6, of the total exports in 2012, 40.45% was bottled wine and 59.55% was bulk wine. The varieties with the highest bottled-to-bulk export ratio are not surprisingly, noble varieties such as Shiraz, Cabernet Sauvignon, Sauvignon Blanc, Merlot and Chardonnay. The highest proportion of bulk exports is under other red wines. Table 7: Bottled and bulk natural wine exports by South Africa in litres (2012) 2012 COUNTRY BLANC DE NOIR / WHITE RED ROSé TOTAL UNITED KINGDOM 44 909 439 38 015 239 8 209 732 91 134 410 GERMANY 31 584 959 38 591 672 7 365 072 77 541 703 SWEDEN 15 328 439 16 790 953 909 308 33 028 700 RUSSIA 30 533 955 1 048 726 16 889 31 599 570 U.S.A. 18 790 964 4 051 095 309 413 23 151 472 THE NETHERLANDS 10 826 654 9 035 054 2 547 356 22 409 064 CANADA 15 458 670 5 273 359 211 026 20 943 055 DENMARK 4 212 249 10 817 734 487 576 15 517 559 FRANCE 4 378 397 5 647 161 2 316 401 12341 959 BELGIUM 4 731 027 3 179 808 287 394 8 198 229 ITALY 654 952 74 490 5 424 617 6 154 059 CHINA 1 092 913 4 849 669 28 080 5 970 662 FINLAND 3 018 110 2 481 722 8 798 5 508 630 ANGOLA 152 299 977 448 10 427 1 140 174 SWITZERLAND 3 654 142 1 086 790 491 102 5 232 034 21

2012 COUNTRY BLANC DE NOIR / WHITE RED ROSé TOTAL SPAIN 4 690 636 5 571 0 4 696 207 JAPAN 1 905 482 1 932 879 12 929 3 851 290 KENYA 2 225 848 1 519 252 64 821 3 809 921 NIGERIA 426 966 2 065 299 313 736 2 806 001 AUSTRALIA 2 533 432 363 372 17 136 2 913 940 UNITED ARAB EMIRATES 1 024 126 1 443 841 77 953 2 545 920 THAILAND 1 026 312 1 248 969 1 832 2 277 113 NEW ZEALAND 1 109 716 933 762 38 786 2 082 264 TANZANIA 1 143 072 805 325 29 585 1 977 982 CZECH REPUBLIC 1 383 993 417 673 15 510 1 817 176 OTHER COUNTRIES 9 229 022 10 204 921 838 913 2 027 856 TOTAL 216 025 774 162 861 784 30 034 392 390 676 950 Source: South African Wine Industry Information and Systems (SAWIS): 2012 Table 7 indicates that in 2012, 28.9% of total volume of wine exports from South Africa went to the United Kingdom (UK), three quarters of which was in bottles and the rest was in bulk. Germany was the second destination with 10.9% of total exports (34% of which was bottled and 66% was in bulk), followed by Sweden with 4.2% (all packaged, much of it Bag-in-box), Russia and Uinted States of America with 8.0% (54% of which was bottled and 46% was in bulk) during the period under scrutiny. Together, these five destinations account for 52% of the volume of wine exports, although the United States of America (USA) is growing quickly and is a potentially important destination for higher quality wine. Interestingly, over 10 million litres of bulk wine (4% of exports) end up in countries like Netherlands, Canada and Denmark for blending with local wines. Table 7 also indicates that bulk exports from South Africa to Europe are increasing, which is hardly what local producers want to do to improve their image. This is due to high local bottling costs and differential taxation in some countries. The 390 676 950 litres of wine exported in 2012 represent a 11.4% increase from 350 419 046 litres in 2011. That increase may have been due to amongst others the weakening of the Rand against other major trading currencies and the decline of markets during 2012 season. Figure 6 illustrates exports volumes of wines of fresh grapes (including fortified wines) from South Africa to Africa between 2003 and 2012. 22

Export Volumes ('000 litres) Figure 6: Export volumes of wine of fresh grapes (including fortified wines) to Africa 6000000 5000000 4000000 3000000 2000000 1000000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Eastern Africa Rest 71031 136991 162928 122940 226715 173440 913457 233058 249944 218468 Middle Africa Rest 4013 2169 2221 8685 10609 7009 17694 22261 24288 13420 Northern Africa 0 0 0 0 0 999 0 1035 1323 855 Western Africa 20405 19780 34396 21489 45068 95660 212567 211788 374696 407908 SADC 656145 785060 761866 733452 1407005 2601522 2757528 3521423 4761446 5000452 Period (Years) Source: Quantec EasyData The figure further illustrates that the major export market for wines of fresh grapes from South Africa to Africa was SADC region, followed by low export volumes from Eastern Africa Rest. The figure also illustrates that exports of wines of fresh grapes from South Africa to the SADC region started to increase in 2003, with a slight increase in 2004 and the lowest decline was experienced in 2006 at approximately 733 452 litres. The figure further illustrates that from 2007 exports of wines of fresh grapes from South Africa to SADC experienced a consistent increase until a peak was attained in 2012 at approximately 5 million litres. The figure also illustrates that exports of wine of fresh grapes from South Africa to Eastern Africa Rest attained a peak in 2009 at approximately 913 457 litres. The increase in exports of wines of fresh grapes from South Africa to SADC during the 2012 represents 5% as compared to 2011, while the decline in exports of wines of fresh grapes from South Africa to Eastern Africa Rest during the 2012 represents 12.6% as compared to 2011. 23

Export Volumes ('000 litres) Figure 7 below shows exports volumes of wines of fresh grapes (including fortified wines) from South Africa to the SADC region between 2003 and 2012. Figure 7: Export volumes of wine of fresh grapes (including fortified wines) to SADC 5000000 4500000 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Angola 167565 150129 430912 445079 975155 1973730 1831294 2574273 3585063 4441730 Democratic Republic of the Congo 11334 43877 10365 7572 124510 43945 31034 65252 28489 44063 Mauritius 53325 171171 61137 55834 64151 62569 107749 120985 90710 63085 Malawi 78510 88745 19374 6175 12107 21398 84374 153699 147812 106285 Mozambique 202260 200818 133610 122689 105372 292448 139338 191404 228784 155219 Seychelles 23465 34386 53122 12824 29490 17658 23857 27744 525269 36930 United Republic of Tanzania 31868 33345 24279 32624 34939 33590 38870 48992 39346 52112 Zambia 17095 37362 19173 29639 31910 45029 441193 22414 24566 33250 Zimbabwe 70723 25227 9894 21016 29371 111155 59819 316660 91407 67666 Source: Quantec EasyData Period (Years) 24

Export Volumes ('000 litres) The figure further shows that over the past decade; Angola commanded the greatest share of wines of fresh grapes from South Africa to SADC, followed by very minimal share of wines of fresh grapes exports volumes from South Africa to Zambia and Seychelles. The figure also shows that over the past ten years, DRC, Mauritius, Malawi, Zimbabwe and Tanzania had very low exports volumes of wines of fresh grapes from South Africa. The figure further shows that exports of wines of fresh grapes from South Africa to the Angola started to increase in 2003, with a slight decline in 2004 of about 150 000 litres. The figure also shows that from 2005 to 2008, exports of wines of fresh grapes from South Africa to Angola increased consistently until a slight decline in 2009 of about 1.8 million litres. The figure further shows that in 2010, exports of wines of fresh grapes from South Africa to the Angola experienced an increase and a surge of exports until a peak was attained in 2012 at approximately 4.4 million litres. The increase in exports volumes of wines of fresh grapes from South Africa to Angola in 2012 represents 23.9% as compared to 2011. Figure 8 below illustrates exports volumes of wines of fresh grapes (including fortified wines) from South Africa to the Americas between 2003 and 2012. Figure 8: Export volumes of wine of fresh grapes (including fortified wines) to Americas 350000 300000 250000 200000 150000 100000 50000 0 Source: Quantec EasyData 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Caribbean 23958 34627 42691 24750 46276 46395 29588 40410 53964 34104 South America 10495 13055 73360 2717 1683 2483 11520 14433 42765 47534 NAFTA 65236 96576 86902 147338 127895 145461 318064 279047 264766 297657 Period (Years) The figure further illustrates that the major market for wines of fresh grapes from South Africa to Americas was mainly NAFTA, followed by very low exports volumes of wines of fresh grapes to South America and Caribbean. The figure also illustrates that exports of wines of fresh grapes from South Africa to NAFTA has been generally increasing between 2003 and 2012, until a peak was attained in 25

Export Volumes ('000 litres) 2009 at approximately 318 064 litres. The figure also illustrates that exports of wines of fresh grapes from South Africa to NAFTA experienced a slight decline in 2010 and 2011 of approximately 279 000 and 264 000 litres respectively. In 2012, exports volumes of wines of fresh grapes from South Africa to NAFTA increased to approximately 297 657 litres. The figure further illustrates that exports of wines of fresh grapes from South Africa to South America attained a peak in 2005 at approximately 73 360 litres. The increase in exports of wines of fresh grapes from South Africa to NAFTA in 2012 represents 12.4% as compared to 2011, while the increase in exports of wines of fresh grapes from South Africa to South America in 2012 represents 11.2% as compared to 2011. Figure 9 below indicates exports volumes of wines of fresh grapes (including fortified wines) from South Africa to Asia between 2003 and 2012. Figure 9: Export volumes of wine of fresh grapes (including fortified wines) to Asia 2500000 2000000 1500000 1000000 500000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Eastern Asia 63709 65269 65121 75792 1114614 173855 2188709 395609 304797 392515 South-central Asia 9538 4039 3740 10867 11172 12863 12674 17112 6682 3266 South-eastern Asia 3592 5018 5556 7322 8643 24775 49586 26375 35392 28753 Western Asia 15456 21969 24458 36770 42233 58828 66830 75119 83774 83894 Source: Quantec EasyData Period (Years) The figure further indicates that Eastern Asia commanded the greatest share of wines of fresh grapes from South Africa to Asia over the past ten years, followed by very low exports volumes of wines of fresh grapes from South Africa to South-central Asia, South-eastern Asia and Western Asia. The figure also indicates that exports of wines of fresh grapes from South Africa to Eastern Asia attained a peak in 2009 at approximately 2.2 million litres. The figure further indicates that in 2010 and 2011, there was a dramatic decline in wine exports of fresh grapes from South Africa to Eastern Asia upto lower levels of about 304 797 litres. Also important to note was that over the past decade, exports of wines of fresh grapes from South Africa to South-central Asia, South-eastern Asia and Western Asia were not more than 100 000 litres per year. In 2012, exports volumes of wines of fresh grapes from South Africa to Eastern Asia experienced a slight increase of about 392 515 litres. The figure further indicates that the slight increase in exports of wines of fresh grapes from South Africa to Eastern Asia in 2012 represents 28.8% as compared to 2011. 26

Export Volumes (''000 litres) Figure 10 below depicts exports volumes of wines of fresh grapes (including fortified wines) from South Africa to Europe between 2003 and 2012. Figure 10: Export volumes of wine of fresh grapes (including fortified wines) to Europe 3000000 2500000 2000000 1500000 1000000 500000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Eastern Europe 9729 10203 25209 39447 45743 71896 42300 83218 85320 46520 Northern Europe 810 1233 7200 855 738 3217 6462 3601 9804 1457 Southern Europe 0 0 0 0 0 792 515 0 0 0 Western Europe Rest 31972 20956 39225 18491 19694 26269 30435 24693 10621 9398 European Union 1601370 831073 875901 792664 1409918 860283 2718898 2714553 1266053 1414104 Source: Quantec EasyData Period (Years) The figure further depicts that the major market for wines of fresh grapes from South Africa to Europe was mainly European Union. The other four European regions had very low levels of wine exports volumes from South Africa of not more than 100 000 litres during the period under scrutiny. The figure also depicts that exports of wines of fresh grapes from South Africa to the European Union started to increase in 2003, and declined between 2004 and 2008 until a peak was attained in 2009 and 2010 at approximately 2.7 million litres respectively. The figure also depicts that in 2011, there was a dramatic decline in wine exportsvolumes of fresh grapes from South Africa to the European Union of about 1.2 million litres. A slight increase in exports volumes of wines of fresh grapes from South Africa to the European Union was experienced at approximately 1.4 million litres. The figure also depicts that the dramatic decline in exports volumes of wines of fresh grapes from South Africa to the European Union in 2012 represents 11.7% as compared to 2011. Figure 11 below illustrates exports volumes of wines of fresh grapes (including fortified wines) from South Africa to European Union between 2003 and 2012. 27

Export Volumes ('000 litres) 2000000 1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 Figure 11: Export volumes of wine of fresh grapes (including fortified wines) to European Union 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Austria 1419 528 1455 1215 1809 3555 6255 5009 5916 4646 Belgium 56158 72762 75471 70754 99974 130704 332415 106071 98996 296141 Germany 88703 37507 54492 211188 133549 83478 134799 138924 93885 88907 Denmark 50667 1949 4342 5430 11843 38413 26437 37372 61398 19045 Finland 13878 36665 11052 46404 66579 91444 79164 68101 97846 160659 France 606 8513 2258 1088 1453 6724 68234 26451 23047 20703 United Kingdom 875501 395969 376162 206294 193727 216447 722417 1821254 415797 441609 Netherlands 346222 158496 230167 125153 744064 138935 187040 152273 178517 120513 Sweden 55525 89063 83915 97439 108939 76240 267830 300576 259797 214055 Source: Quantec EasyData Period (Years) The figure further illustrates that over the past ten years, United Kingdom commanded the greatest markt share of wines of fresh grapes from South Africa to European Union, followed by Netherlands. The figure also illustrates that other European regions had very low levels of wine exports volumes from South Africa during the period under scrutiny of not more than 800 000 litres per year. The figure further illustrates that exports volumes of wines of fresh grapes from South Africa to the United Kingdom attained a peak in 2010 at approximately 1.8 million litres. The figure also depicts that in 2011, there was a dramatic decline in wine exports volumes of fresh grapes from South Africa to the United Kingdom to lower levels of about 415 797 litres. The figure further illustrates that exports volumes of wines of fresh grapes from South Africa to the Netherlands attained a peak in 2007 at approximately 744 064 litres. The figure further illustrates that in 2012, exports volumes of wines of fresh grapes from South Africa to United Kingdom slightly increased to approximately 441 609 litres. The figure also illustrates that the slight decline in exports volumes of wines of fresh grapes from South Africa to the United Kingdom in 2012 represents 99.9% as compared to 2011. Figure 12 below shows exports volumes of wines of fresh grapes (including fortified wines) from South Africa to Oceania between 2003 and 2012. 28

Export Volumes ('000 litres) Figure 12: Export volumes of wine of fresh grapes (including fortified wines) to Oceania 350000 300000 250000 200000 150000 100000 50000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Australia and New Zealand 59410 25529 22356 12350 67639 103718 333004 293962 304273 188181 Source: Quantec EasyData Period (Years) The figure further shows that the major market for wines of fresh grapes from South Africa to Oceania was mainly Australia and New Zealand. The figure also shows that exports of wines of fresh grapes from South Africa to Australia and New Zealand started to increase in 2003, and then a decline occurred between 2004 and 2006 to lower levels of about 12 350 litres. The figure also shows that exports of wines of fresh grapes from South Africa to Australia and New Zealand experienced an increase again in 2007 and 2008, until a peak was attained in 2009 at approximately 333 004 litres. The figure further shows that in 2010 and 2012, there was a slight decline in wine exports volumes of fresh grapes from South Africa to Australia and New Zealand, while in 2011 exports of wines of fresh grapes from South Africa to Australia and New Zealand saw a slight increase of about 304 273. The decline in exports volumes of wines of fresh grapes from South Africa to Australia and New Zealand in 2012 represents 38.2% as compared to 2011. 3.1 Provincial and district export values of South African wines A review of provincial level trade data shows that the Western Cape Province had high export values over the past decade. This can be attributed to the fact that the province is firstly the leader in both the production and export of the wines. Secondly, the registered exporters are based in the province and thirdly, the province has the Cape Town harbour that serves as an exit point for wine products to Europe and other regions. Figure 13 below depicts the value of wine exports from each province of South Africa. 29

Export Value (Rands) Figure 13 shows the value of wines of fresh grapes (including fortified wines) exports by provinces of South Africa to the world between 2003 and 2012. 7000000000 Figure 13: Value of wine exports by Provinces 6000000000 5000000000 4000000000 3000000000 2000000000 1000000000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Western Cape 3072805647 3348073087 3663086387 3483172101 4597050925 6112797419 5910106429 5551400459 5335866443 5849741240 Eastern Cape 8203559 7090318 4324217 6025611 8461078 6272787 7544896 11041320 11843333 7597061 Northern Cape 1543094 4229562 6744199 1601106 2364093 3708658 1134998 2856596 4161311 3839340 Free State 45437 677113 198528 1417916 143926 455783 289 735 0 21384 Kwazulu-Natal 6634470 7064992 9854035 10676189 16749313 18880739 14154553 22822172 10278307 8514134 North West 400462 36968 205262 439921 354207 172650 1624333 1343245 2798696 3189619 Gauteng 61064469 69523768 119810276 59792055 105429902 86710818 66771215 94587111 89244299 77730561 Mpumalanga 106533 228534 735297 0 63861 26716 390883 77055 267724 811810 Limpopo 800 53966 1821475 378131 1324676 1045 13710244 37688752 37340763 29130581 Period (Years) Source: Quantec EasyData 30

The graph further shows that over the past decade, Western Cape Province commanded the greatest share of wines of fresh grapes from South Africa to the world, followed by very low exports values of wines of fresh grapes from other eight remaining provinces to the world. During the same period under examination, exports values of wines of fresh grapes from the Western Cape Province to the world started to increase in 2003, with a consistent increase and a small peak in 2007 was attained an export value of approximately R4.5 billion. The graph further shows that in 2008, exports value of wines of fresh grapes from Western Cape Province to the world attained a peak in 2008 at approximately R6.1 billion. Other provinces featured intermittently but usually registered very low values in terms of trade over the past ten years. Between 2009 and 2011, the graph shows that there was a consistent decline in exports of wines of fresh grapes from Western Cape Province to the world of about R5.3 billion in 2011. In 2012, exports value of wines of fresh grapes from the Western Cape Province to the world experienced a slight increase at approximately R5.8 billion. The slight increase in exports of wines of fresh grapes from the Western Cape Province to the world in 2012 represents 9.43% as compared to 2011. The Western Cape Province is generally a major producer and exporter of wine in South Africa. 31

Export Value (Rands) The following figures (14 22) shows the exports values of wines of fresh grapes from various districts in the nine provinces of South Africa. It is clear from figure 14 above that exports values of wines of fresh grapes from the Western Cape Province to the world between 2003 and 2012 were mainly from Cape Winelands District Municipality, followed by the City of Cape Town Metro and Overberg District municipalities. 5E+09 Figure 14: Value of wine exports by Western Cape Province 4.5E+09 4E+09 3.5E+09 3E+09 2.5E+09 2E+09 1.5E+09 1E+09 500000000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 City of Cape Town Metropolitan Municipality 1520651659 1229239549 746360093 599706385 770513744 950644612 835914564 1058513397 872526217 979390162 West Coast District municipality 154526211 164343883 154577318 165055051 276739630 373268987 310147519 369953029 352108189 337077764 Cape Winelands District Municipality 1348675971 1886109288 2662388535 2565797527 3338347283 4375085643 4217741101 4043890103 4019933436 4438725889 Overberg District municipality 47031873 65795807 94970132 149333021 206465901 403061444 464213916 64066126 77462173 90937712 Eden District municipality 1919933 1839943 3743233 2264760 3593197 10243238 81038946 14558527 13714214 3264776 Central Karoo District municipality 0 744617 1047076 1015357 1391170 493496 1050383 419276 122214 344936 Source: Quantec EasyData Period (Years) 32

Export Value (Rands) The graph further depicts that high export values of wines of fresh grapes from the Western Cape Province were mainly from the Cape Winelands District to the world were recorded in 2003 at about R13.4 billion, while high export values of wine from the Cape Winelands District to the world were recorded in 2008 and 2012 at approximately between R43.7 billion and R44.3 billion. The graph further depicts exports value of wines of fresh grapes from the City of Cape Town Metro to the world attained a peak in 2003 at approximately R15.2 billion. The wine exports from the Cape Winelands District with no doubt contributed strongly to the economy of the District municipality during the same period under examination. Between 2009 and 2011, the graph also depicts that there was a consistent decline in exports values of wines of fresh grapes from Western Cape Winelands District to the world of about R4.0 billion in 2011. Exports values of wines of fresh grapes from Cape Winelands to the world increased in 2012 to approximately R44.3 billion. The increase in exports values of wines of fresh grapes from Cape Winelands District to the world in 2012 represents 10.2% as compared to 2011. The Western Cape Province is generally a major producer and exporter of wine in South Figure 15 below indicates exports values of wines of fresh grapes from the Eastern Cape Province to the world between 2003 and 2012. Figure 15: Value of wine exports by Eastern Cape Province 8000000 7000000 Source: Quantec EasyData 6000000 5000000 4000000 3000000 2000000 1000000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Cacadu District municipality 4671179 4354094 1924964 3881128 4018121 4905302 6437538 5732898 6901210 5557142 Amatole District municipality 2284370 2076077 1706040 1799244 3670469 1092281 171839 4137804 4205155 2029206 Chris Hani District municipality 8717 24021 0 0 0 0 0 0 0 0 O.R.Tambo District municipality 636403 491312 650625 313722 766992 238889 0 0 0 0 Nelson Mandela Metropolitan Municipality 602889 144813 42588 31518 5497 36315 935519 1170618 736967 10712 Period (Years) The figure further indicates that over the past decade, Cacadu district commanded the greatest share of exports values of wines of fresh grapes from the Eastern Cape Province to the world, followed by Amathole District, Nelson Mandela Metro and O.R Tambo District. The figure also indicates that 33

Export Value (Rands) exports of wines of fresh grapes from Cacadu District started to increase in 2003, and then experienced a decline in exports of wines of fresh grapes in 2004 with lower levels experienced in 2005 at about R1.9 million. Between 2006 and 2009, Cacadu District experienced a surge in exports of wines up to higher levels of about R6.4 million. The figure further indicates that exports of wines from Cacadu District to the world saw a slight in 2010 at about R5.7 million until a peak was attained in 2011 at approximately R6.9 million. The figure also indicates that exports of wines from Amathole District ports to the world attained a peak in 2007, 2010 and 2011 at approximately R3.6, R4.1 and R4.2 million respectively. In 2012, exports value of wines of fresh grapes from Cacadu regions to the world experienced a decline of about R5.5 million. The decline in exports values of wines of fresh grapes from Cacadu District to the world in 2012 represents 20.3% as compared to 2011, while the dramatic decline in exports values of wines of fresh grapes from Amathole District to the world in 2012 represents 52.4% as compared to 2011. The Eastern Cape Province is generally not a major producer and exporter of wine. It is clear from Figure 16 below that export values of wines of fresh grapes from the Northern Cape Province to the world were mainly from Siyanda District Municipality between 2003 and 2012. Figure 16: Value of wine exports by Northern Cape Province 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Pixley ka Seme District municipality 0 191776 205658 510 0 0 0 680690 463500 454747 Siyanda District municipality 1322369 4037786 6538541 1600596 2364093 3708658 1134998 2175906 3697811 3384592 Frances Baard District municipality 220724 0 0 0 0 0 0 0 0 0 Source: Quantec EasyData Period (Years) The figure further illustrates that high export values of wines of fresh grapes from Northern Cape Province to the world were mainly from Siyanda District municipality over the past decade. The municipality recorded between R1.1 and R6.5 million over the past ten years. The figure also illustrates that exports values of wines of fresh grapes from Siyanda District attained a peak in 2005 at approximately R6.5 million. The graph also illustrates that in 2010, Pixley ka Seme District was the second with higher exports values of wines of fresh grapes to the world of about R680 000 during the 34

Export Value (Rands) period under scrutiny. The graph further illustrates that there were a number of declines in exports values of wines of fresh grapes from Siyanda District to the world in 2003, 2006 and 2009 at approximately R1.3, R1.6 and R1.1 million respectively. In 2010, exports values of wines of fresh grapes from Siyanda District to the world started to increase again at approximately R2.7 million until a small peak was attained in 2011 at about R3.6 million. In 2012, exports values of wines of fresh grapes from Siyanda District to the world experienced a slight decline of about R3.3 million. The decline in exports values of wines of fresh grapes from Siyanda District to the world in 2012 represents 8.5% as compared to 2011. The Northern Cape Province is generally not a major wine exporter. Figure 17 below depicts exports values of wines of fresh grapes from Free State Province to the world over the past decade. Figure 17: Value of wine exports by Free State Province 1000000 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Xhariep District municipality 0 0 0 917627 142450 455783 0 0 0 21384 Motheo District municipality 45437 0 0 860 1475 0 289 735 0 0 Lejweleputswa District municipality 0 0 232 905 0 0 0 0 0 0 Thabo Mofutsanyane District municipality 0 677113 198295 498524 0 0 0 0 0 0 Source: Quantec Easy Data Period (Years) The figure further depicts that Xhariep District was the main exporter of wines of fresh grapes from the Free State Province to the world over the past ten years, followed by Thabo Mofutsanyane District. The figure also depicts that between 2003 and 2005, Xhariep District did not export wines of fresh grapes to the world, until a peak was attained in 2006 at approximately R917 627. The figure further depicts that between 2009 and 2011, there were no exports of wines of fresh grapes from Xhariep District to the world. In 2012, exports of wines of fresh grapes from Xhariep District to the world experienced an increase of approximately R21 384. Exports values of wines of fresh grapes from Thabo Mofutsanyane District to the world started to increase in 2004 and at the sametime attained a peak at approximately R677 113. Motheo and Lejweleputswa Districts municipalities had very intermittent exports of wines of fresh grapes from Gree State to the world over the past decade. The increase in exports of wines of 35

fresh grapes from Xhariep District to the world in 2012 represents 100% as compared to 2011. The Free State Province is generally not a major exporter of wine. 36

Export Value (Rands) Figure 18 below shows exports values of wines of fresh grapes from Kwa-Zulu Natal Province to the world between 2003 and 2012. Figure 18: Value of wine exports by KwaZulu-Natal Province 25000000 20000000 15000000 10000000 5000000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Ugu District municipality 387651 582804 507819 27723 0 0 0 0 0 0 UMgungundlovu District municipality 28842 5615 3942 772 11699 29948 2982 8518 4565 4532 Uthukela District municipality 0 22924 22668 27840 85831 0 0 29509 425 0 Umzinyathi District municipality 0 0 0 0 0 0 0 1684 24938 0 Uthungulu District municipality 34016 34093 46029 1660 0 0 32012 10002 24206 592 ilembe District municipality 517 531 580677 0 2687 0 0 0 0 0 ethekwini Metropolitan Municipality 6183445 6419024 8692900 10618193 16649097 18850791 14119560 22772459 10224174 8501595 Period (Years) Source: Quantec EasyData 37

The figure further shows that high export values of wines of fresh grapes from KwaZulu-Natal Province to the world were mainly from ethekwini Metropolitan municipality. The figure also shows that high exports values of wines of fresh grapes from ethekwini Metro to the world were recorded between 2007 and 2010 at approximately R16.6 and R22.7 million respectively. The figure further shows that exports of wines of fresh grapes from ethekwini Metro municipaklity started to increase in 2003, with a consistent increase from 2004 to 2008 until a decline in 2009. The figure also shows that exports of wines of fresh grapes from ethekwini Metro municipality to the world attained peak in 2010 at approximately R22.7 million. In 2011 and 2012, exports values of wines of fresh grapes from ethekwini Metro to the world declined consistently to lower levels of about R8.5 million in 2012. The figure further shows that over the past decade, Ugu, UMgungundlovu, Uthukela, Uthungulu, ilembe District municipalities recorded lower levels of exports of wines of fresh grapes from KwaZulu-Natal Province to the world of not more than R5 million per annum. The decline in exports values of wines of fresh grapes from ethekwini Metro to the world in 2012 represents 16.7% as compared to 2011. The KwaZulu-Natal Province is generally not a major wine exporter. 38

Export Value (Rands) Figure 19 below indicates exports values of wines of fresh grapes from North West Province to the world between 2003 and 2012. Figure 19: Value of wine exports by North West Province 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Bojanala District municipality 190983 2148 204583 42723 0 17801 0 24809 969 0 Central District municipality 209428 34820 0 395075 342886 152851 0 0 0 0 Southern District municipality 50 0 679 2123 11321 1998 1624333 1318436 2797727 3189618 Source: Quantec EasyData Period (Years) During the same period under examination, the graph further indicates that exports of wines of fresh grapes from North West Province to the world were mainly from Southern District municipality, followed by very low exports values from Central and Bojanala District municipalities. The figure also indicates that exports of wines of fresh grapes from Southern District to the world started to increase at a slow pace in 2003 until 2008. The figure further indicates that in 2009, exports of wines of fresh grapes from Southern District to the world experienced a dramtic increase of about R1.6 million. In 2010, exports values of wines of fresh grapes from Southern District to the world saw a slight decline and in 2011 exports increased substantially until a peak was attained at approximately R3.1 million. The sharp increase in exports values of wines of fresh grapes from Southern District to the world in 2012 represents 14.8% as compared to 2011. The North West Province is generally not a major wine exporter. Figure 20 illustrates exports values of wines of fresh grapes from Gauteng Province to the world between 2003 and 2012. 39

Export Value (Rands) Figure 20: Value of wine exports by Gauteng Province 100000000 90000000 80000000 70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sedibeng District municipality 386378 351467 136669 276 30071 600000 18002 99 1381 270278 Metsweding District Municipality 139348 0 15819 0 50 0 411002 8662 1060 219 West Rand District Municipality 177479 174382 285428 155237 211775 660243 2538815 393835 76791 1407116 Ekurhuleni Metropolitan Municipality 32214044 23009722 89127981 26358971 74202483 31643785 33759860 41314161 37477684 29648823 City of Johannesburg Metropolitan Municipality 27655374 45199796 27809615 32506184 30506967 52876177 29538828 51476305 50097624 42528888 City of Tshwane Metropolitan Municipality 491845 788401 2434764 771388 478557 930612 504708 1394049 1589758 3875237 Source: Quantec EasyData Period (Years) 40

Export Value (Rands) The figure further illustrates that exports of fresh grapes from Gauteng Provincce to the world were mainly from Ekurhuleni Metro municipality followed closely by the City of Johannesburg Metro municipality over the past ten years. During the period under scrutiny, wine exports values from Ekurhuleni Metro to the world attained a peak in 2005 at approximately R98.1 million. City of Johannesburg Metro also contributed strongly to the economy of Gauteng Province during the same period under examination, attaining a peak in 2008 at approximately R52.8 million. The figure also illustrates that there was a decline in exports values of wines from Ekurhuleni Metro to the world in 2011 at approximately R37.4 million, while there was also a decline in exports values of wines from city of Johannesburg Metro to the world in 2011 at approximately R50.1 million. In 2012, exports of wines of fresh grapes from Ekurhuleni Metro to the world experienced a slight decline of about R29.6 million. The slight decline in exports values of wines of fresh grapes from Ekurhuleni Metro municipality to the world in 2012 represents 28.5% as compared to 2011, while slight decline in exports values of wines from City of Johannesburg Metro municipality to the world in 2012 represents 15.0% as compared to 2011. The Gauteng Province is generally not a major wine exporter. Figure 21 below indicates exports values of wines of fresh grapes from Mpumalanga Province to the world between 2003 and 2012. Figure 21: Value of wine exports by Mpumalanga Province 900000 800000 700000 600000 500000 400000 300000 200000 100000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Gert Sibande District municipality 47295 0 0 0 0 0 3899 1099 0 6076 Nkangala District municipality 0 1667 63068 0 0 349 386661 0 0 26 Ehlanzeni District municipality 59238 226867 672228 0 63861 26367 323 75956 267724 805708 Source: Quantec EasyData Period (Years) The figure further indicates that over the past decade, exports of wines of fresh grapes from Mpumalanga Province to the world were mainly from Ehlanzeni District. The graph also indicates that Nkangala District came second in terms of exports of wines of fresh grapes from Mpumalanga Province to the world. The graph further indicates that exports of wines of fresh grapes from Ehlanzeni District to the world started to increase in 2004, until the first peak was attained in 2005 at approximately R672 228, while Nkangala Distrit municipality attained a peak in 2009 at approximately R386 661. The graph also indicates that in 2010 and 2011, there was a slight increase in exports value of wines of fresh grapes from Ehlanzeni District to the 41

Export Value (Rands) world of about R267 724. Exports of wines of fresh grapes from Ehlanzeni district to the world attained a peak in 2012 at approximately R805 708, The increase in exports value of wines of fresh grapes from Ehlanzeni District to the world in 2012 represents 200% as compared to 2011, while the increase in exports values of wines of fresh grapes from Nkangala District to the world in 2012 represents 100% as compared to 2011. The Mpumalanga Province is generally not a major wine exporter. Figure 22 depicts exports values of wines of fresh grapes from Limpopo Province to the world between 2003 and 2012. Figure 22: Value of wine exports by Limpopo Province 40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Mopani District municipality 800 0 44335 0 0 1045 0 0 0 3083466 Vhembe District municipality 0 0 2113 378131 1176092 0 13480858372110233667947325836929 Capricorn District municipality 0 52661 1775027 0 0 0 0 0 3043 429 Waterberg District municipality 0 1306 0 0 148583 0 225618 477728 658246 209757 Greater Sekhukhune District Municipality 0 0 0 0 0 0 3768 0 0 0 Source: Quantec EasyData Period (Years) The figure further depicts that exports values of wines of fresh grapes from Limpopo Province to the world were mainly from Vhembe District, followed by very low levels of wines of fresh grapes exports from Mopani, Capricorn, Waterberg, and Greater Sikhukhune Districts. The graph also depicts that exports of wines of fresh grapes from Vhembe District to the world were from a low base during the first half of the period under review, but managed to pick up during the second half until a peak was attained in 2010 at approximately R37.2 million. However, Mopani District has emerged as a second exporter of wines of fresh grapes from Limpopo Province to the world over the past decade attaining high levels in 2012 at approximately R3.1 million. The slight decline in exports of wines of fresh grapes from Vhembe District to the world in 2012 represents 29.5% as compared to 2011. The Limpopo province is generally not a major wine exporter. 42

3.2 Share analysis Table 9: Share of Provincial wine exports to the total RSA wine exports (%) Years Province 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Western Cape 97.52 97.41 96.23 97.75 97.15 98.13 98.25 97.02 97.16 48.91 Eastern Cape 0.26 0.21 0.11 0.17 0.18 0.10 0.13 0.19 0.22 0.06 Northern Cape 0.05 0.12 0.18 0.05 0.05 0.06 0.02 0.05 0.08 0.03 Free State 0.00 0.02 0.01 0.04 0.00 0.01 4.80 1.28 0.00 0.00 Kwazulu-Natal 0.21 0.21 0.26 0.30 0.35 0.30 0.24 0.40 0.19 0.07 North West 0.01 0.00 0.01 0.01 0.01 0.00 0.03 0.02 0.05 0.03 Gauteng 1.94 2.03 3.15 1.68 2.23 1.39 1.11 1.65 1.63 0.65 Mpumalanga 0.00 0.01 0.02 0.00 0.00 0.00 0.01 0.00 0.00 0.01 Limpopo 2.54 0.00 0.05 0.01 0.03 1.68 0.23 0.66 0.68 0.24 Source: Calculated from Quantec EasyData Table 9 above is an illustration of provincial share towards national wines of fresh grapes exports over the past etn years. The table further illustrates that Western Cape Province has commanded the greatest share of wine exports between 2003 and 2012, followed by Gauteng Province. It is clear that Western Cape Province derives its advantage from the fact that most producers and exporters are based in Western Cape Province because of good infrastructure and logistics services. Table 10: Share of district wine exports to the total Western Cape provincial wine exports (%) Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 District City of 49.49 36.71 20.37 17.22 16.76 15.55 14.14 19.07 16.35 16.74 Cape Town West 5.02 4.91 4.22 4.74 6.02 6.11 5.25 6.66 6.60 5.76 Coast Cape 43.89 56.33 72.68 73.66 72.62 71.57 71.36 72.84 75.34 75.9 Wineland s Overberg 1.53 1.97 2.59 4.29 4.50 6.59 7.85 1.15 1.45 1.55 Eden 0.06 0.05 0.10 0.07 0.08 0.17 1.37 0.26 0.26 0.06 Central Karoo 0.00 0.02 0.03 0.03 0.03 0.01 0.02 0.01 0.00 0.01 Source: Calculated from Quantec EasyData Table 10 shows the share of district wines of fresh grapes exports to the total Western Cape provincial wine exports (%). Between the period 2003 and 2012, the Cape Winelands District commanded the greatest share in exports of wine simple because of the competitive advantage in wine producing areas. 43

Table 11: Share of district wine exports to the total Gauteng provincial wine exports (%) Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 District Sedibeng 0.63 0.51 0.11 0.00 0.03 0.69 0.03 0.00 0.00 0.35 Metswedi ng West Rand Ekurhule ni Metro City of Joburg City of Tshwane 0.23 0.00 0.01 0.00 4.74 0.00 0.62 0.01 0.00 0.00 0.29 0.25 0.24 0.26 0.20 076 3.80 0.42 0.09 1.81 52.75 33.10 74.39 44.08 70.38 36.49 50.56 43.68 41.99 38.1 45.29 65.01 23.21 54.37 28.94 60.98 44.24 54.42 56.14 54.7 0.81 1.1 2.03 1.29 0.45 1.07 0.76 1.47 1.78 4.99 Source: Calculated from Quantec EasyData Table 11 indicates the share of district wines of fresh grapes exports to the total Gauteng provincial wine exports (%). Between the period 2003 and 2012, City of Johanesburg and Ekurhuleni Metropolitan municipalities commanded the greatest share in exports of wines of fresh grapes simple because of good logistic services for exportation and the presence of O.R. Tambo Airport next to the area. Table 12: Share of district wine exports to the total Kwa-Zulu Natal provincial wine exports (%) Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 District Ugu 5.84 8.25 5.15 0.26 0.00 0.00 0.00 0.00 0.00 0.00 District Umgungun 0.43 0.08 0.04 0.01 0.01 0.16 0.02 0.04 0.04 0.05 dlovu Uthukela 0.00 0.32 0.23 0.26 0.51 0.00 0.00 0.13 0.04 0.00 Uthungulu 0.51 0.48 0.47 0.02 0.00 0.00 0.23 0.04 0.24 0.01 Ilembe 0.01 0.01 5.89 0.00 0.02 0.00 0.00 0.00 0.00 0.00 District ethekwini 93.20 90.86 88.22 99.46 99.40 99.84 99.75 99.78 99.72 99.9 Source: Calculated from Quantec EasyData Table 12 illustrates the share of district wines of fresh grapes exports to the total Kwazulu-Natal provincial wine exports (%). Between the period 2003 and 2012, the ethekwini Metro commanded the greatest share in exports of wines of fresh grapes simple because of the competitive advantage in exportation and the presence of Durban harbour. 44

Table 13: Share of district wine exports to the total Eastern Cape provincial wine exports (%) Years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 District Cacadu 56.94 61.41 44.51 64.41 47.49 78.20 85.32 51.92 58.27 73.1 Amatole 27.85 29.28 39.45 29.86 43.38 17.41 2.28 37.48 35.51 26.7 Chris 0.11 0.34 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Hani OR 7.76 6..93 15.05 5.21 9.06 3.81 0.00 0.00 0.00 0.00 Tambo Nelson Mandela 7.35 2.04 0.98 0.52 0.06 0.58 12.40 10.60 6.22 0.14 Source: Calculated from Quantec EasyData Table 13 illustrates the share of district wines of fresh grapes exports to the total Eastern Cape provincial wine exports (%). Between the period 2003 and 2012, Cacadu District, followed by Amathole District commanded the greatest share in exports of wines of fresh grapes simple because of the presence of Port Elizabeth and East London harbours that makes it easy to ship the wine products to different regions of the world. Table 14: Share of district wine exports to the total Northern Cape provincial wine exports (%) Years: District Pixley ka Seme Siyanda District Frances Baard 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0.00 4.53 3.05 0.03 0.00 0.00 0.00 23.83 11.14 11.8 85.70 95.47 96.95 99.97 100 100 100 76.17 88.86 88.2 14.30 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Source: Calculated from Quantec EasyData Table 14 illustrates the share of district wines of fresh grapes exports to the total Northern Cape provincial wine exports (%). Between the period 2003 and 2012, Siyanda District commanded the greatest share in exports of wines of fresh grapes in the Northern Cape Province. Table 15: Share of district wine exports to the total Limpopo provincial wine exports (%) Years: 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 District Mopani 100 0.00 2.43 0.00 0.00 100 0.00 0.00 0.00 10.6 Vhembe 0.00 0.00 0.12 100 88.78 0.00 98.33 98.73 98.23 88.7 Capricor 0.00 97.58 97.45 0.00 0.00 0.00 0.00 0.00 0.01 0.00 n Waterber g 0.00 2.42 0.00 0.00 11.22 0.00 1.65 1.27 1.76 0.72 45

Years: District Greater Sekhukh une 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 Source: Calculated from Quantec EasyData Table 15 illustrates the share of district wines of fresh grapes exports to the total Limpopo provincial wine exports (%). Between the period 2003 and 2012, Vhembe District commanded the greatest share in exports of wines of fresh grapes in that province. Table 16: Share of district wine exports to the total Mpumalanga provincial wine exports (%) Years: 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 District Gert 44.39 0.00 0.00 0.00 0.00 0.00 0.99 1.43 0.00 0.75 Sibande Nkangala 0.00 0.73 8.58 0.00 0.00 1.31 98.92 0.00 0.00 0.00 Ehlanzeni 55.61 99.27 91.42 0.00 100 98.69 0.08 98.57 100 99.2 Source: Calculated from Quantec EasyData Table 16 illustrates the share of district wines of fresh grapes exports to the total Mpumalanga provincial wine exports (%). Between the period 2003 and 2012, Ehlanzeni District commanded the greatest share in exports of wine products to different regions of the world. Table 17: Share of district wine exports to the total North West provincial wine exports (%) Years: 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 District Bojanala 47.69 5.81 99.67 9.71 0.00 10.31 0.00 1.85 0.03 0.00 Central 52.30 94.19 0.00 89.81 96.80 88.53 0.00 0.00 0.00 0.00 District Southern District 0.01 0.00 0.33 0.48 3.20 1.16 100 98.15 99.97 100 Source: Calculated from Quantec EasyData Table 17 shows the share of district wines of fresh grapes exports to the total North West provincial wine exports (%). Between the period 2003 and 2012, Central District commanded the greatest share in exports of wines of fresh grapes in that province. Table 18: Share of district wine exports to the total Free State provincial wine exports (%) Years: 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 District Xhariep 0.00 0.00 0.00 64.72 98.98 100 0.00 0.00 0.00 100 46

Import Quantity ('000 litres) Years: 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 District Motheo 100 0.00 0.00 0.06 1.02 0.00 100 100 0.00 0.00 Lejwelepu 0.00 0.00 0.12 0.06 0.00 0.00 0.00 0.00 0.00 0.00 tswa Thabo Mofutsan yane 0.00 100 99.88 35.16 0.00 0.00 0.00 0.00 0.00 0.00 Source: Calculated from Quantec EasyData Table 18 depicts the share of district wines of fresh grapes exports to the total Free State provincial wine exports (%). Between the period 2003 and 2012, Xhariep District commanded the greatest share in exports of wines of fresh grapes in that province. 4. IMPORTS OF WINES OF FRESH GRAPES Figure 23 below depicts imports volumes of wines of fresh grapes (including fortified wines) from various regions into South Africa between 2003 and 2012. 700000 600000 500000 400000 300000 200000 100000 0 Figure 23: Import volumes of wine of fresh grapes (including fortified wines) from various regions 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Africa 42 28 321 329 4081 1937 63726 4558 431 314 Americas 470 336 266 424 255 213 426 1831 1739 1013 Asia 2 22520 111 704 2102 17 2160 85 392 161 Europe 171972 203854 51772 409769 423807 426344 333571 375788 512936 580594 Oceania 131 852 1099 180 325 146 123 187 136 458 Source: Quantec EasyData Period (Years) The figure further depicts that the major import market for wines of fresh grapes from the world into South Africa originated from Europe, followed by minimal imports volumes of wines from Africa and Asia. The figure also depicts that imports of wines of fresh grapes from Europe into South Africa started to increase in 2003 47

Import Quantity ('000 litres) with a slight increase in 2004, until a dramatic decline occurred in 2005 at approximately 51 772 litres. The graph further depicts that between 2006 and 2008, imports of wines of fresh grapes from Europe into South Africa experienced a dramatic increase in 2008 of about 426 344 litres. Although there was a slight decline in imports volumes of wines of fresh grapes in 2009, positive increases appeared in 2010 with a consistent increase and a peaknin 2012 at approximately 580 594 litres. The dramatic increase in imports volumes of wines of fresh grapes from Europe into South Africa in 2012 represents 13.2% as compared to 2011. Figure 24 below depicts imports volumes of wines of fresh grapes (including fortified wines) from Americas into South Africa between 2003 and 2012. Figure 24: Import volumes of wine of fresh grapes (including fortified wines) from Americas 1800 1600 1400 1200 1000 800 600 400 200 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 South America 252 275 134 141 50 41 41 1340 1558 211 NAFTA 208 61 132 283 205 172 372 480 161 795 Source: Quantec EasyData Period (Years) The figure further illustrates that the major import market for wines of fresh grapes from Americas into South Africa was mainly South America, followed by NAFTA during the period under examination. Imports of wines of fresh grapes from South America into South Africa were from a low base during the first half of the period under scrutiny, until a substantial increase was experienced in 2010 at approximately 1340 litres and a peak in 2011 at about 1558 litres. The figure also illustrates that imports of wines of fresh grapes from NAFTA into South Africa were also from a low base during the first half of the period under review, until a substantial increase between 2009 and 2012. Imports volumes of wines of fresh grapes from NAFTA into South Africa attained a peak in 2012 at approximately 795 litres. The dramatic increase in imports volumes of wines of fresh grapes from South America into South Africa in 2011 represents 16.3% as compared to 2010. Figure 25 below depicts imports volumes of wines of fresh grapes (including fortified wines) from Asia into South Africa between 2003 and 2012. 48

Import Quantity ('000 litres) Figure 25: Import volumes of wine of fresh grapes (including fortified wines) from Asia 25000 20000 15000 10000 5000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Eastern Asia 0 22511 12 650 1135 0 810 83 14 10 South-eastern Asia 0 0 0 54 19 6 0 0 375 0 Western Asia 0 9 98 0 900 11 1350 0 2 151 Source: Quantec EasyData Period (Years) The figure further depicts that the major import market for wines of fresh grapes from Asia into South Africa mainly originated from Eastern Asia, followed by very low or minimal volumes of wines of fresh grapes from Western Asia. The figure also depicts that imports volumes of wines of fresh grapes from Eastern Asia into South Africa started to increase in 2004 and at the sametime attained a peak at approximately 22 511 litres. The graph further depicts that between 2005 and 2012; imports volumes of wines of fresh grapes from Eastern Asia into South Africa were from a very low base and were not more than 2000 litres per annum. The slight decline in imports volumes of wines of fresh grapes from Eastern Asia into South Africa in 2012 represents 28.6% as compared to 2011. Figure 26 below indicates imports volumes of wines of fresh grapes (including fortified wines) from Europe into South Africa between 2003 and 2012. 49

Import Quantity ('000 litres) Figure 26: Import volumes of wine of fresh grapes (including fortified wines) from Europe 700000 600000 500000 400000 300000 200000 100000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 European Union 171960 203832 351770 409724 423781 426295 333496 375775 512930 580588 Source: Quantec EasyData Period (Years) The figure further shows that the major import market for wines of fresh grapes from the Europe into South Africa mainly originated from the European Union over the past decade. The figure also shows that imports volumes of wines of fresh grapes from the European Union into South Africa started to increase in 2003 with a consistent increase between 2004 and 2008 at approximately between 171 000 and 426 000 litres. In 2009, imports volumes of wines of fresh grapes from the European Union into South Africa experienced a slight decline, until a consistent increase was experienced from 2010 to 2012 at approximately 375 775 to 580 588 litres. The dramtic increase in imports volumes of wines of fresh grapes from the European Union into South Africa in 2012 represents 13.2% as compared to 2011. Figure 27 shows imports volumes of wines of fresh grapes (including fortified wines) from the European Union into South Africa between 2003 and 2012. 50

Import Quantity ('000 litres) 500000 450000 400000 Figure 27: Import volumes of wine of fresh grapes (including fortified wines) from European Union 350000 300000 250000 200000 150000 100000 50000 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Spain 1910 4645 11494 25325 10610 2311 2119 1654 9951 64850 France 157291 175882 227372 336951 394024 393580 304534 328769 413481 444058 Italy 3856 17585 68904 43431 17137 28891 24553 42078 82861 62329 Source: Quantec EasyData Period (Years) The figure further indicates that the major import market for wines of fresh grapes from European Union into South Africa was France, followed by minimal import volumes from Italy and Spain. The figure also indicates that imports of wines of fresh grapes from France into South Africa were from a low base between 157 000 and 394 000 litres. The increase in imports of wines of fresh grapes from France into South Africa experienced a consistent increase until the first peak was attained in 2007 and 2008 at approximately 393 580 and 394 024 litres respectively. The figure further indicates that imports volumes of wines of fresh grapes from France into South Africa experienced a decline between 2009 and 2010, until a consistent increase and a peak was attained in 2012 at approximately 444 058 litres. The dramatic increase in imports volumes of wines of fresh grapes from France into South Africa in 2012 represents 7.4% as compared to 2011. 4. MARKET INTELIGENCE 4.1 Competitiveness of South African wine exports Competitiveness is described as an industry s capacity to create superior value for its customers and improved profits for the stakeholders in the value chain. The driving force in sustaining a competitive position is productivity that is output efficiency in relation to specific inputs with regard to human, capital and natural resources. South African exports for wine of fresh grapes, including fortified wines, and grape must whose fermentation has been arrested by addition of alcohol, in containers of > 2 litres represent 5.8% of world exports and its ranking on the world exports is number 7. 51

Table 19: List of importing markets for grape wines exported by South Africa in 2012 Trade Indicators Importers Exported value 2012 (USD thousand) Share in South Africa's exports (%) Exported quantity 2012 (tons) Unit value (USD/unit) Exported growth in value between 2008-2012 (%, p.a.) Exported growth in quantity between 2008-2012 (%, p.a.) Exported growth in value between 2011-2012 (%, p.a.) Tariff (estimated) faced by South Africa (%) World 730441 100 412846 1769 0-3 United Kingdom 136370 18.7 90702 1503-10 0 3.7 Germany 94173 12.9 71876 1310 4-13 3.7 Sweden 68181 9.3 32298 2111-4 -19 3.7 Netherlands 53421 7.3 23824 2242-5 -20 3.7 United States of America 47487 6.5 23689 2005 5 21 0.7 Canada 45463 6.2 20355 2234 7 12 0 Denmark 31264 4.3 15529 2013-4 -24 3.7 China 28850 4 5980 4824 57 38 14.7 Belgium 22590 3.1 11465 1970 1-9 3.7 Russian Federation 19967 2.7 29760 671 12 103 19.7 Angola 19415 2.7 5559 3492 4 5 27.9 Japan 14016 1.9 4002 3502 17 68 0.1 France 13685 1.9 12581 1088 7 6 3.7 Finland 12584 1.7 5254 2395-4 -1 3.7 Nigeria 9737 1.3 3111 3130 15-17 20 United Arab Emirates 8808 1.2 3082 2858 15 10 0 Kenya 8288 1.1 3688 2247 22-3 24.9 Source: Trade Map 52

Table 19 illustrates the list of importing markets for wines of fresh grapes exported by South Africa to the world in 2012. The table further illustrates that United Kingdom, followed by Germany and Sweden imported greater volumes of wines of fresh grapes from South Africa. United Kingdom imported 90 702, Germany imported 71 876 tons and Sweden imported 32 298 tons during the same period under examination. The table also illustrates that Germany imported more than what the world imported from South Africa, in value terms between 2008 and 2012. South Africa s exported growth in value to United Kingdom decreased to approximately 10%, while South Africa s exported growth in value to Germany increased to approximately 4% between 2008 and 2012. South Africa s exported growth in value to Sweden decreased to approximately 4% between 2008 and 2012. United Kingdom had a highest share in South Africa s exports of wines of fresh grapes at approximately 18.7, Germany at approximately 12.9% and Sweden at approximately 9.3%. It is interesting to note that Russian Federation was the most competitive import market for South Africa in terms of value at 57% between 2008 and 2012 and also in terms of growth in value at 38% between 2011 and 2012. 53

Figure 27: Growth in demand for the South African grape wine exported in 2012 Source: Trade Map 54

Figure 27 above shows growth in demand for South African wines of fresh grapes exported in 2012. The figure further shows that United Kingdom, Germany and Sweden were the biggest markets of wines of fresh grapes from South Africa between 2008 and 2012. During the same period under review, markets such as Russian Federation, Kenya, United Republic of Tanzania, United Arab Emirates and Japan had a growing demand for wines of grapes from South Africa due to the fact that their markets are dynamic and attract a lot of suppliers from the world. Countries like Netherlands, New Zealand, Belgium and France, their imports from the world of wines of fresh grapes from the world have declined during the same period under scrutiny. China was the most attractive market (dynamic markets) both in terms of South Africa s annual growth in exports and the annual growth of partner countries imports from the world followed by Kenya and Japan. The bubble graph further shows that China at 57% annual growth of South Africa s exports was the most attractive markets for South Africa in a declining market for wines of fresh grapes between 2008 and 2012. 55

Figure 28: Prospects for market diversification for grape wines exported by South Africa in 2012 Source: Trade Map 56

Figure 28 above depicts prospects for market diversification for wines of fresh grapes exported by South Africa to the world in 2012. The bubble graph further depicts that during the same period under review, United Kingdom, Germany and Sweden were the biggest markets of wines of fresh grapes exported by South Africa. United Kingdom commanded the greatest share of approximately 18.7% per annum in South Africa s exports of wines of fresh grapes, while it s annual growth of partner countries imports of wines of fresh grapes from the rest of the world were approximately 0% per annum between 2008 and 2012. The bubble graph futher depicts that if South Africa were to diversify its exports of wines of fresh grapes, the most attractive market for diversification would be China, followed by Kenya and Japan. 57

Table 20: List of supplying markets for grape wines imported by South Africa in 2012 Trade Indicators Exporters Imported value 2012 (USD thousand) Share in South Africa's imports (%) Imported quantity 2012 (tons) Unit value (USD/unit) Imported growth in value between 2008-2012 (%, p.a.) Imported growth in quantity between 2008-2012 (%, p.a.) Imported growth in value between 2011-2012 (%, p.a.) Tariff (estimated) applied by South Africa (%) World 24312 100 2582 9415 7 12 France 17625 72.5 621 28380 5 10 0 Italy 2353 9.7 543 4335 18 20 0 Area Nes 1107 4.6 675 1641 69 55250 Portugal 913 3.8 251 3633-1 1 0 Spain 760 3.1 246 3088 58 106 0 United Kingdom 395 1.6 7 53668 33 6 0 New Zealand 296 1.2 49 5983 61 53 25 Chile 198 0.8 60 3284 29-72 25 Germany 151 0.6 34 4483 8-14 0 Australia 131 0.5 30 4356 9 0 25 Israel 85 0.3 14 5942 3 150 25 Source: TradeMap 58

Table 20 indicates the list of supplying markets for wines of grapes imported by South Africa from the world in 2012. The table further indicates that South Africa is a net exporter of wines of fresh grapes as the country exported 412 846 litres and only imported 2 582 litres over the same period. The table also indicates that greater volumes of wines of fresh grapes from the world into South Africa were from France, followed by Italy and Portugal during the period under review. France supplied South Africa with greater quantities of about 621 tons of wines of fresh grapes to South Africa, while Italy supplied South Africa with 543 tons of wines of fresh grapes and Portugal provided the smallest quantities of about 251 tons of wines of fresh grapes during the 2012 period. Interesting to note was that France had a highest share (72.5%) in South Africa s imports of wines of fresh grapes but although Italy also supplied substantial quantities of wines of fresh grapes to South Africa during the 2011 period, their share (9.7%) in South Africa s imports of wines of fresh grapes is very low. The table further indicates that South Africa s imported growth in value for wines of fresh grapes from Italy increased more than that of the world at approximately 18% as compared to 7% from the world. The world average imports of wines of fresh grapes into South Africa in value terms increased at 7% between 2008 and 2012. The imported growth in value from the world into South Africa also increased between 2011 and 2012 to approximately 12% per annum. 59

Figure 29: Competitiveness of suppliers to South Africa for grape wines imports in 2012 Source: Trade Map 60